Final Text of EU 'Fiscal Compact' Completed - Report

Bulgaria in EU | January 19, 2012, Thursday // 20:49|  views

A text of the intergovernmental fiscal treaty that EU member states are about to sign at the next European Council January 30 has been leaked to media.

The compact, aiming at creating a coordinated financial policy among eurozone and other EU member states to tackle the crisis, was broadly negotiated in at the last European Council, December 9, 2011.

Among the key points that agencies are noting is that member states who have not signed the new fiscal treaty will not be eligible to receive bailout aid from the mechanisms established to that end by the European Union.

Among the 27 EU member states, only the United Kingdom has resolutely refused to sign the new treaty, which will unconditionally apply in full only to eurozone members, and in parts to the other member states who will sign it.

The stated purpose of the new treaty is "to strengthen the economic pillar of the Economic and Monetary Union by adopting a set of rules intended to foster budgetary discipline through a fiscal compact, to strengthen the coordination of economic policies and to improve the governance of the euro area, thereby supporting the achievement of the European Union's objectives for sustainable growth, employment, competitiveness and social cohesion."

Among the leading requirements of the compact is that state budget deficit does not exceed 3%, and sovereign debt - 60% of the national GDP for each member state.

Deviations from these requirements are allowed, but only under exceptional circumstances; unjustified breaches are suspect to financial penalties imposed by the Court of Justice of the EU.

The fiscal treaty further has a section on economic policy coordination and convergence, mandating that governments should do everything in their power to enhance competitiveness and employment in their countries.

An informal Euro Summit is created to meet on a regular basis, together with the President of the European Commission and the President of the European Central Bank.

The pact, entitled TREATY ON STABILITY, COORDINATION AND GOVERNANCE IN THE ECONOMIC AND MONETARY UNION, mandates an entry into force on January 1, 2013, should all parties have ratified it by then.

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Tags: EU, European Union, fiscal union, fiscal compact, financial stability, deficit, debt, crisis, European Council, European Commission, Eurozone, European Central Bank, euro, United Kindgom, Competitiveness, employment


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